PUBLISHED : Monday, 22 October, 2007, 12:00am
UPDATED : Monday, 22 October, 2007, 12:00am

Match the right definitions about inflation

1 Price index

2 Gold standard

3 Net return

4 Purchasing power

a Until the 1970s, the US dollar could be exchanged against a fixed sum of gold. This is not the case any longer

b The value of what you can buy with one dollar

c The measure of how prices vary in a period (month, year etc)

d The extra money you get from an investment after taking out the impact of inflation

Hyperinflation, deflation and disinflation

Hyperinflation: inflation can sometimes get out of control, with prices changing every day or even several times a day. One famous example is Germany in the 1920s. In 1923, prices in Germany multiplied by more than 10 billion! A more recent example is Argentina in the 1980s.

Deflation: is the opposite of inflation. The demand for money is higher than the supply, so prices tend to go down. Hong Kong underwent a period of deflation after the 1997 Asian financial crisis.

Disinflation: means that inflation is going down; prices still increase but at a slower rate. For example, this has been the case in the US over past few years.

Here are a few activities you can research on this week's topic

1) Ask your grandparents if they remember how much a Star Ferry ticket or a kilogram of rice cost 20 or 30 years ago.

2) Try to find old editions of the South China Morning Post and look at their price.

3) Check the inflation rate in Hong Kong in a financial newspaper.

4) Create your own price index: choose the 10 items that you buy the most and follow their prices: how did they change in a year? Your price index can include rent and bills. How does your own price index compare with the official Hong Kong inflation rate?


1. c, 2. a, 3. d, 4. b